As Britain emerges from the European Union with the freedom to set its own trading arrangements, clear thinking on trade is more necessary than ever.
The debate around the recent trade deal with Australia illustrated this. The focus was almost entirely on the impact on British producers of competition from Australian imports. The benefits to British consumers in the form of more choice and lower prices went almost unremarked. Indeed, the idea that there was a choice was ignored: it was often suggested that, rather than being able to choose Australian products produced with different methods, British consumers would somehow be forced-fed such products. After all, if you don’t like them don’t buy them.
No organization is more cognizant than the Cobden Centre of the age-old fallacies which crop up in debates on trade. In the first half of the 19th century, Richard Cobden’s Anti-Corn Law League campaigned for the abolition of the Corn Laws, “a catch all name for the thicket of tariffs which had been erected to keep foreign wheat out of Britain”. These Laws were “Justified on the deathless grounds of ‘food security’” and “had the handy effect of benefiting the landowning classes, many of whom sat in the Commons and Lords as Tories”. Despite the fact that, “as with any tariff, [the Corn Laws] had the effect of making the product in question and associated goods more expensive [with] The burden…borne disproportionately by the members of the emerging working class…who spent a large percentage of their incomes on food”, it was, as now, the interests of these producers which initially dominated the debate.
The Anti-Corn Law League’s campaign was ultimately successful and Sir Robert Peel’s government repealed the Corn Laws in 1846. This was, according to economists Douglas A. Irwin and Maksym G. Chepeliev, “the signature trade policy event of the nineteenth century”. But who benefited? And by how much?
In their paper, titled ‘The Economic Consequences of Sir Robert Peel: A Quantitative Assessment of the Repeal of the Corn Laws’, Irwin and Chepeliev provide “a quantitative general equilibrium assessment of the Corn Law repeal to evaluate its impact on different sectors of the British economy, on domestic income distribution (through changes in both earnings and expenditures), and on overall economic welfare”. They find, in line with earlier work, that:
“…the repeal had pronounced consequences for income distribution: landowners lost roughly 4-5 percent of their income while labor and capital-owners saw their incomes rise about 1 percent. Taking into account the different sources of income and the different pattern of expenditure between high and low-income groups, we find that the welfare of the top 10 percent of income earners falls by about 1.4 percent and the welfare of the bottom 90 percent increases by about 0.3-0.6 percent. Thus, the repeal was a progressive, “pro-poor” policy.”
This remains a valuable lesson today. The horror at cheap imports demonstrated by some in response to the Australia trade deal amounts to a horror at cheaper food and lower prices. It is the less well-off who will benefit most, just as it was in Cobden and Peel’s time.